Should Competitors Fear Google Fiber?

A day after Netflix (NASDAQ:NFLX) announced Google Fiber as the best Internet Service Provider for streaming in America, Google (NASDAQ:GOOG) chairman Eric Schmidt made comments that the broadband initiative was more than just an experiment in the Kansas Cities area, as many believed and competitors hoped. Schmidt’s claim that Google is looking to expand Fibers should have Internet and television providers Verizon (NYSE:VZ), Comcast (NASDAQ:CMCSA), and Time Warner Cable (NYSE:TWC) shaking in their boots.

What Is Google Fiber?

Google Fiber is an all-in-one Internet and cable deal, with broadband speeds 100 times faster than today’s average accompanied by 200 HD cable channels, including Netflix, at no extra cost. Plus Fiber allows users to record up to eight shows at once (which has Grandma’s everywhere champing at the bit) on a DVR that is nearly impossible to fill, according to Google.

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If you’re not interested in the high-speed Internet, Google will provide you with regular Internet speed for free (plus a $300 installation fee) that is guaranteed to stay free for at least seven years. The Gigabit Internet (100 times faster) starts at $70/month, with no installation fee, and the Gigabit Internet + Television starts at $120/month.

The Catch?

Well, the problem as of now is that Google Fiber is only available to those in Kansas City, Missouri and Kansas City, Kansas. The relatively small markets Fiber operates in haven’t given competitors Comcast and TimeWarner reason to worry. However, if Google follows through and begins expanding outside of the Midwest, those companies could be in trouble.

CHEAT SHEET Analysis: Is Fiber a Catalyst for Google’s Stock?

One of the core components of our CHEAT SHEET Framework focuses on catalysts that will move a company’s stock. Fiber is definitely a catalyst. An Internet service faster than any other is one thing, but one that provides access to seemingly every cable channel from NFL Network to History Channel at no extra cost is an entirely different beast. The question is when will this catalyst kick in? The answer is when Google announces specific metropolitan cities with specific dates.

CHEAT SHEET Analysis: Google Has an Excellent Performance History Versus Peers.

Another core component of our CHEAT SHEET Framework focuses on a company’s performance versus its peers and within its sector. Since Google is just breaking into the cable and Internet sector, we must then look at its history against competition in the search engine and smartphone/tablet industries.

Let’s start with the first: search engines. Ever used Microsoft’s recently?

Let’s move onto the smartphone/tablet business, where Google was late to come onto the scene but has since made a strong push with its Android. Of the 121.3 million people in the U.S. that own a smartphone, 53.6 percent of them have an Android device.

No matter which way you slice it, Google expanding in the cable and Internet market will generate ripples beyond their stock alone. TimeWarner, Comcast, and their peers will soon have to answer the critics that say cable is too expensive and Internet too slow in America. Meanwhile, Google looks poised to become a dominant force in yet another market.

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